dition ratio report" Online).
Leverage ratios measure the relative contribution of stockholders and creditors. A leverage ratio indicates the extent to which the business is reliant on debt financing. The debt to equity ratio shows significant improvement between fiscal year 2000 and fiscal year 2003 at Disney.
Profitability ratios measure a company's ability to generate revenues in excess of the costs incurred in producing those revenues. For example, the gross profit margin ratio indicates how efficiently a business is using its materials and labor in the production process. The formula is: The Gross profit margin formula is: Gross Profit divided by Total Sales. As shown in the chart above, the Gross Profit margin ratio has dropped from 16.10% in 2000 to 10.10% in fiscal year 2003.
The return on sales formula is: Net profit divided by sales. As shown above, profits have stabilized over the last two years at around 4.75%.
The return on equity formula is: Net income divided by Shareholders equity. It indicates what return a company is generating on the owners' investment. As shown in the table above, return on equity has stabilized at just over 5% for the last two years.
The return on assets formula is: Net income divided by average total assets. This ratio has stabilized for the last years at around 2.5%.
Efficiency ratios measure the quality of a business' receivables and inventory. An efficiency ratio measure how efficiently a company uses and controls its assets, how effectively the firm is paying suppliers.
DSO measures the age, in terms of days, of a company's accounts receivable, and the average time it takes to turn the receivables into cash. The DSO formula is: [Accounts Receivable Balance / Sales] [times] The Number of Days In The Period.
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